Alan, I have been in a situation very similar to yours. After getting my Bachelor's in math (also from a small, essentially no-name school), I spent 23 years in the software industry (Silicon Valley). Boredom and frustration with my work, and an ongoing interest in math since my undergraduate days all motivated me to consider returning graduate school. Being laid off during the recession in 2002 gave me the final nudge. I immediately entered a master's degree program in math at Cal State Hayward, full time.

At first, I was thinking that the master's would be my terminal degree. It was only after I gained a mentor while in the program that I learned that it was feasible to go on to a PhD program, even at my age. In particular, the vast majority of PhD grad students in math have a teaching assistantship, which pays for tuition and supplies a (very modest) stipend. One bit of advice to me was to not go to any school which did not offer a TA-ship. Working on my master's provided me recent reference letters. (Some of my best undergraduate references were deceased.) I cannot say that working on a master's before the PhD program is required, or even recommended. Be aware that many schools have programs where a student enters under a master's degree program, and then before completing the master's the student can decide, together with faculty consultation, whether to continue on to a PhD program. (My PhD school, the University of Washington, offers such a program.) In fact a few schools require all their students to complete a master's before formally being accepted into their PhD program. These programs, where master's and PhD are both done at the same school, will save some time overall since all units are guaranteed to be transferable. (None of my master's degree work at CSUH transfered to UW, but it did equip me to pass one of the preliminary exams at UW.)

I finished my PhD in 2009. I was hoping to enter academia, and I did a 2-year postdoc at UBC. But as everyone has noted, the academic market is dismal at this time, and I took a position in government. So it is good that you are aware of the job market conditions and planning accordingly. As David White noted, there are several industries that hire mathematicians. He also noted that the NSA and affiliated contractors hire a great number of mathematicians, doing interesting work. I would also note that there are other government labs and agencies that also hire some number of mathematicians. In any of these, I would suggest that while it's OK to seek "math-oriented" work, you should at the same time remain open to leveraging your industry experience, especially any software skills you may have acquired.

All in all, I have no regrets for pursuing a PhD. Indeed, I would have had regrets had I not. Best to you in your pursuits.